Just like Gov't programs, piigs (sic) start out cute and cuddly before ending up as gross and scary.

Inquiring minds are on Ireland and Greece as investors are dumping bonds in both countries in a reprise of the sovereign debt crisis that shook global markets six months ago, as political infighting threatens to stymie budget reforms in the most debt-strapped countries.

On Tuesday, Irish credit costs surged to a record high and bond prices fell sharply, after it was reported Jim McDaid, a member of Ireland’s Fianna Fail party in parliment, resigned and added to worries the government would fail to muster the votes for planned spending cuts and tax hikes totalling 15 billion euros ($21 billion.):

“Investors are worried about political factions coming into agreement about getting fiscal policy back on track,” said Andrew Wilkinson, senior market analyst for Interactive Brokers.

Credit-default spreads for Irish sovereign debt jumped 22 basis points to 5.20 percentage points, and hit 5.30 percentage points, a record high, said Markit. The gain means it costs an incredible $520,000 to buy five years of default insurance for $10 million in Irish government debt. Absolutely stunning.

Ireland’s 10-year bonds tumbled, sending yields up 19 basis points to 7.17% and further widening the gap with benchmark German bonds, which yielded 2.47%.

Greece has it own problems…yields on its 10-year government bonds surged 10 basis points to 10.67%. Selloffs in Greek and Portuguese debt were in full force last week when their governments’ own budget initiatives came into doubt.